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Is HECS permissible?

Answered according to Hanafi Fiqh by Askimam.org

In Australia, many of msulim students are studying at University where tuition fees is very high and unafforable for students or theirparents. Option is to get for fees help from government. Detail is in below web site or what will be returned back is, I copied and pasted below as wll. Please advise if this is permissble.

JazakaAllah 

http://studyassist.gov.au/sites/studyassist/helppayingmyfees/hecs-help/pages/hecs-help-welcome#HowMuchWillAHecs-HELPLoanCost

What if I don’t want to pay any amount up-front?

Eligible students who don’t want to pay any of their student contribution amounts up-front can use a HECS‑HELP loan for the whole amount. Students who use a HECS‑HELP loan will be required to pay their debt through the tax system when they earn above the minimum threshold for compulsory repayment.

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How much will a HECS‑HELP loan cost me?

There is no real interest charged on HECS‑HELP loans. However, your debt will be indexed each year to reflect changes in the Consumer Price Index to maintain its real value.

The indexation adjustment is made by the Australian Taxation Office on 1 June each year and applies to the portion of your debt that has been unpaid for 11 months or more. For more information see Interest and indexation.

Important: see the Budget 2014 – Student Overview page to find out how the 2014-15 Budget announcement affects indexation applied to HELP loans.

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

HECS-HELP is a Commonwealth government loan scheme available to eligible students enrolled in Commonwealth supported places (CSPs).

The government pays the loan amount directly to your course provider on your behalf and a HECS-HELP debt is then recorded with the Australian Taxation Office against your Tax File Number. You’ll begin to repay the debt once your income is above the minimum threshold.[1]

HELP debts do not attract interest, but are instead indexed to the Consumer Price Index (CPI) on 1 June each year, based on the annual CPI to March of that year. The indexation rate applied on 1 June 2006 was 2.8% and 3.4% on 1 June 2007. Indexation applies to the part of the debt that has been unpaid for 11 months or more. Thus, indexation is calculated on the opening HELP debt balance on 1 July of the previous year plus any debt incurred in the first half of the current year (usually for first semester courses) less any compulsory and voluntary repayments, with bonus. Any HELP debt incurred on second semester courses (usually determined in June) will not be subject to indexation until the next year. After indexation, the new balance is rounded down to a whole dollar amount.[2]

In HECS-HELP loan, the debt is indexed each year to reflect changes in the Consumer Price Index (CPI). Indexing the debt to reflect changes in the CPI is not permissible according to Shari’ah, as it falls in the definition of interest. Hence, it impermissible to apply for such a loan.[3]

And Allah Ta’āla Knows Best

Muhammad Haris Siddiqui

Student Darul Iftaa
Melbourne, Australia 

Checked and Approved by,
Mufti Ebrahim Desai.

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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